With Father’s Day coming up, now is a good time to review some tips that your father might probably give you about buying a home and paying mortgage. In most cases, your dad has more experience buying homes and paying a mortgage. Here are some common sense tips that many fathers would pass on to their children.

• Only buy what you can afford. It's easy today to get caught up buying a larger home than you need. If you have a small family, you probably don’t need to purchase a home that has six bedrooms and four bathrooms. This could cost you thousands more than you need to pay. Your dad would probably tell you to realistically evaluate your needs and buy a home that fits them.
• Don't be house poor. Is the house you are considering buying going to give you enough money left over each month to save? Will you be able to put money away for your child’s college tuition? Will you have enough left over each month to have some fun with the family or save up for a yearly vacation? Consider these things when choosing a home. You don’t want to have your entire paycheck each month going towards your mortgage payment because life is too short.
• Don't buy a money pit. Make sure the house you buy doesn't require a lot of unexpected expenses. Your father might tell you about the bathroom renovation that turned into a total house gut. It happens.
• Plan for unexpected expenses. Owning a house it more expensive than you might think. Make sure you budget for a flooded basement, damaged roof, new furnace, etc. It's certain that you will have at least one major repair a year.
• Know what you want. Make sure you understand what you want in a house and stick to that. Don't "settle" for a house, especially in today's buyers market. Buying and selling a house requires a major time and money investment - know yourself so you can get it right and your now back on the market in six months.
• If you are going to start searching for a home soon, get your finances in order. Make sure you have the downpayment ready to go and pay down any credit card and consumer debt you may have.
• Shop around and find the best mortgage rate you can.

Father’s Day is a way to honor our dads and everything that they do for us. But the best thing we can do throughout the year is to honor their wisdom and their advice. Have you taken your father’s advice lately?

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Owning a home is a dream for many Americans. And while it is a great investment, there are several costs that go along with owning a home that you may not be aware of. Here are some of those costs to help you prepare for home ownership without any major financial surprises.

Property Taxes
Your property tax is one cost that many people do not think about when they purchase a home. Many homeowners pay their property tax twice each year. However, you can work out a deal with your mortgage lender in which your property taxes can be factored into your monthly mortgage payments.

Septic Tanks
If you have a septic tank rather than connecting to the main sewer line, you should be prepared for repair costs or maintenance costs. Tree roots are a common problem with septic tanks and, if neglected, can cause thousands of dollars of repairs.

Repairs
Unlike renting, you are responsible for the cost when your home needs repairs. If you are purchasing an older home that has not had many upgrades, you will likely find yourself making repairs soon after moving in.

Inspections
Before you make your decision on a home, you will want to hire an inspector to inspect it for you. By hiring your own inspector, you can be sure that they are working in your best interest so they will alert you to potential problems in the near future. A good inspector could cost a few hundred dollars, but it could save you thousands in the long run.

Mortgage Insurance
If you have less than 20 percent equity built up in your home, you will be required to pay private mortgage insurance, or PMI. This is typically built into your mortgage payments and it helps protect your lender’s interest in the property.

Utility Bills
When renting a home or an apartment, the landlord often pays for some of the utility bills, such as water and sewer. When you own a home, these bills are the homeowner’s responsibility. Also, you may find that your electricity bills and other utilities are higher each month especially if your new home is larger than the place you were renting before.

Maintenance
There are several tasks that you take for granted before you own a home. Maintaining the lawn is just one of those chores that you will either have to do yourself or hire someone to do for you. But changing furnace and air filters and other chores will be your responsibility now that you are a homeowner.

These extra costs should not deter you from continuing your goal of owning a home. The cost of home ownership is nothing compared to the freedom and sense of accomplishment that you will feel when you move in. Just be prepared for the extra cost and save up some extra money before making your purchase if you need to.

With the recent “robo-signing” scandal, many home buyers are hesitant, if not downright worried, about buying a home that has been foreclosed on. The key to buying a foreclosed property is to make sure you have title insurance when you make the purchase.

If you don’t have title insurance on the foreclosure that you purchase, there is always a chance that the former owner can claim their rights to the property even though you have a contract that says the home belongs to you. During the robo-signing controversy, this happened to several people who purchased a home that was unlawfully foreclosed upon. The original owners came back to the property and since they were unlawfully evicted from the home, they retained ownership to it regardless of what happened since the foreclosure occurred.

To be clear, there is nothing “unsafe” about buying a foreclosed property. When you make your purchase, make sure that you and your lender purchase title insurance for the property to ensure that you have the legal right to occupy the home. If you have title insurance, the previous owner cannot reclaim ownership of the property regardless of whether it was illegally foreclosed upon. The previous owner may have a financial recourse against the mortgage lender that foreclosed on the property, but they will have no recourse against you. You are a “good faith purchaser” when you have title insurance which means you have nothing to worry about. Title insurance also protects the new buyer from liens against the house, forged documents and other defects in the title that often occur.

This is good news for people who were thinking of buying a foreclosed property but were nervous due to title issues. There are other issues with foreclosed properties. Often, the previous owners will have trashed the house before they left, or stipped it bare. You have to perform repairs to a foreclosed home in order to bring it up to code before you can live in it. You may have to clean it up, too. But that’s why many bank-seized homes are available at such a bargain price.

Most people strive to get the highest APY possible on their investments, which is great. Your money should work for you, and in order for your money to do that, it’s key that it at least beat the current inflation rate so that your hard-earned dollars don’t lose value. However, if you’re carrying a large balance on a high-interest rate credit card or on other loans, that great 4% savings rate you found could be quickly negated by high interest rates you’re paying for loans. During a credit crunch, only borrowers with the highest credit ratings are usually able to get loans at decent rates (if they can get them at all). Although some experts say the recent credit crunch is beginning to end and credit is starting to flow again, one fact remains: the higher your FICO score, the lower the interest rate you’ll pay for loans and credit cards.

Nowadays, even insurance companies use your FICO score to get your credit-based insurance score, which can drastically affect your insurance premiums. So, how can you raise your FICO score? Payment history and amount-owned balances make up about 65% of your FICO score, so those two things are key to a good score. Payment history makes up about 35% of your score, so making payments on time is essential. If you’ve had some late payments in the past, the impact of those delinquencies fades as time progresses while your recent good payment history takes precedence.

Amount-owed balances make up about 30% of your credit score, and so paying down (or paying off) your balance is the quickest thing you can do to raise your score. It’s important to realize that using credit is not the same thing as carrying a balance—so if you can make charges on your credit card and pay the balance in full every month, that’s ideal. This is because credit scores not only determine your risk; it also analyzes how you use your credit. You should be “using” some of your credit (like on credit cards), but you don’t have to (and shouldn’t) carry a balance to do so.

Other factors that influence your credit score include things like the length of credit history and the number of recently opened accounts. A rapid new-account build up can flag you as a potential risk, as do a lot of credit report inquires for new accounts at different banks. If you want to do some rate shopping to see which bank will give you the best APR for a car loan, for example, it’s best to start and complete your search in a limited time window. FICO scores will distinguish between a search for a car loan made at multiple banks within a few days of each other, and a search for a car loan, two credit cards, and department store card made within two months of each other.

It’s also important to check your credit reports once a year to make sure there are no errors on your report that could be weighing your score down. You can do so for free at www.annualcreditreport.com. This site is the only authorized source for your free credit report under federal law. Other places that advertise “free credit reports” will usually try to get you to purchase other services or pay some type of fee.

You also should be extremely wary of any place that promises a quick fix for your credit report. In fact, the FTC has an entire page on their website devoted to how you can avoid these scams. Attorneys at the nation’s consumer protection agency say they’ve never seen a legitimate credit repair operation that makes claims they can do things for you like “erase your debt.” However, there are things you can do to improve your credit score on your own—but it will take some time.

Housing prices continued their fall and are now at mid-2002 levels according to the Case-Shiller Housing Index. Looking at the data, it's appears that we are close to a bottom in the correction. First time home buyers, time to dive in.

Let's look at the data. Below is a graph of Case-Shiller data going back to 1988. You can see the huge runup starting in 1998.

You can see the uptick in 2009-2010 as the government tried to pop up the housing market with incentives. As the incentives have disappeared, mortgages have become more difficult to obtain, and foreclosures continue to come onto the market, prices have moved downward again.

Let's take a step back and look at house appreciation over a greater period of time. I graphed data available fromthe Federal Housing Finance Agency.

As you can see, the data starts in 1975 and more clearly shows the slope steepening, starting in 1998. Like everything in the world, what comes up, comes back down. And housing has come down.

To better determine how much we can expect housing to come down, I manually added a line of best fit - the red line. It shows where housing might be if prices had followed normal growth trends. We are approaching an intersection with that red line, meaning housing has fallen back to the level we would expect with a "normal" growth rate.

Conclusion

Based on this data, I believe that prices are almost done correcting from the huge run-up over the past ten years. That doesn't mean housing can't go below the red line though. A lack of mortgage availability, a change in the mortgage interest deduction, and the general economy will all impact housing prices. But for now, the huge price gains we saw over the past decade are gone.

A think tank in the UK recently stated that the nation’s banks should continue to maintain the tough mortgage rules in order to prevent another housing crisis in the future. The banks and lenders in the United States have also toughened up their lending criteria to prevent the same type of catastrophe that we witnessed just a few years ago. But it seems that we are slowly losing the grip on the tighter regulations. Should we be following the example of what the UK banks are doing?

In the UK, the Institute for Public Policy Research (IPPR) states that some of the restrictions on buying a home should include the following: a mortgage should be capped at 90 percent of the home’s value and borrowers should not be allowed to borrow more than the equivalent of 3.5 times their annual income. These restrictions are due to the fact that the nation has had four housing bubbles in the last four decades which has created plenty of damage for the country’s economy. The most recent housing problems, according to the IPPR, were due to loosened mortgage lending practices. This resulted in property values plummeting.

The regulations suggested by the IPPR also stated that buyers who are purchasing properties to rent to others should require a larger deposit so that the rental payments paid by the renters would be enough to pay for the monthly mortgage payments. These requirements, according to the IPPR, would prevent “small time speculators” from causing another housing bubble by looking for large profits from the “buy-to-let market,” which was one of the main reasons for the house price bubbles in previous years.

The group also said that the UK had an “addiction to house-price inflation” which is hurting the national economy and stability in housing prices is one of the best and most effective ways to prevent any further damage to the economy right now and in the future. Between 1996 and 2006, the housing prices tripled, according to the IPPR. And mortgage lending is more than 80 percent of the UK’s gross domestic product. That compares to only 73 percent in the United States, 44 percent in Western Europe and 49 percent in Canada.

Should the United States banks keep their mortgage loan terms strict like they have been? Is the UK going to be the example for us to help prevent another housing bubble? Or are the strict guidelines hurting the economy even further? Let us know your thoughts about this situation.

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There was a time when a 30-year fixed rate mortgage was the only mortgage product that buyers would consider. If you wanted to get a 15-year fixed rate or worse yet, a 10-year fixed rate mortgage, you were looked at as “strange.”

But those days are changing.

According to a report in The Washington Post, more and more current homeowners are refinancing their homes into a 15-year or less mortgage term with numbers hovering around 3 percent. And those trends are substantiated by Frank Nothaft, the chief economist for Freddie Mac. The mortgage backer said that about 30 percent of the homeowners who refinanced their home in the last quarter chose to replace their 30-year fixed rate mortgage term with either a 15 or a 20 year fixed rate mortgage which offered much lower mortgage rates in addition to the shorter terms.

Smaller banks and institutions around the country are noticing a similar trend, but many of the refinancers through these community lending institutions are choosing even shorter terms. According to Jeff Lipes, the senior vice president of Family Choice Mortgage and the president of the Connecticut Mortgage Bankers Association, said many banks are offering mortgage rates of less than 3 percent with terms of seven years. These banks will also set up an automatic withdrawal from the borrower’s bank account to make everything even easier.

Of course, a shorter mortgage term isn’t for everybody. Take, for instance, a $150,000 mortgage loan on a 15-year fixed rate at 5.5 percent. If you have 13 years to go, you are going to pay about $1,225 per month. By the end of the term, you will pay a little over $191,000. If you reduce the term to a 7-year fixed rate at 3 percent interest, you will only pay about $166,500 by the end of the term. That will save you more than $21,000 in the long run. However, your monthly payments will need to be almost $2,000 per month. In addition to that, you will also have to qualify for the refinancing option, which is not always so easy with today’s stricter underwriting standards.

With the number of foreclosures and short sales on the market, it’s difficult to have your home appraised at an amount that will help you qualify for a refinance. And if you have less than 25 percent equity in your home, it is even more difficult. Low credit scores will also stand in your way.

Of course, it never hurts to check into refinancing your home at a shorter term and lower rate. Shop around to various lending institutions and see if you could qualify for a refinance so you can start preparing for a debt-free retirement today!

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